Armed Polite Society
Main Forums => Politics => Topic started by: Ben on October 10, 2010, 07:42:06 PM
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Well this just torques me off to no end. It was the "Lawmaker fix" of Fannie May, Freddie Mac, and telling banks that they had better lend to unqualified individuals that got us in this mess. Now we have to "stop the foreclosures". How about letting the market naturally stabilize instead, jackwagons?
I'm willing to bet that a very large number of all foreclosures are connected to individuals who should have never been homeowners in the first place, or are in way too much home for their income. Not to mention that any scheme that is being foisted upon banks by La Raza and NAACP is going to be pretty much the opposite of fair.
http://www.foxnews.com/politics/2010/10/10/lawmakers-struggle-address-foreclosure-fiasco/
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If you really think the buzzheads in Washington DC are ever going to learn from their mistakes -- or change -- then I think you are not giving them the credit they deserve.
Need I elaborate? [tinfoil] :angel: =D
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Oh, I'm giving them that credit, believe me. :)
What's most maddening is that this is basically happening for November votes by the masses. Even many of the Lawmakers who know this is a terrible idea will go for it for some lousy votes, and idiots will vote for them, then 6 months from now wonder why the housing situation has gotten even worse.
I feel sorry for the buyers of these properties that will now be out of luck, and probably out some ducats since the freeze means they can't make their in-process purchases.
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some of the paperwork shenanigans that have gone on are way over the top need to stop
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I don't disagree that there are some people out there taking advantage of the situation, just like some took advantage of the liberal lending policies before the housing crash. Yet once again, the govt solution is the broad brush stroke that hurts more people than it helps.
Bank of America and other banks seem to be looking at things internally right now. The best govt solution is to let the market handle it for now, not immediately step in and take the whole process over. That's just way too Hugo for me.
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As long as those living off the government have the right to vote and outnumber voting workers, this will continue.
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the problems were no accident and the banks weren't "surprised " by them. just surprised they got caught. i have zero confidence that they would act if not compelled. the circus i am going through with pnc give me no confidence they are so backed up they are telling me 5 maybe 6 months from when they got my notarized paperwork on a refi to get it properly recorded and up to date. meanwhile it louses me up on trying to buy a car at a good rate till they get their paperwork in order
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Don't worry, this bill will only be 1995 pages long, well short of 2000. We'll know everything that is in it except for the stuff we don't.
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Don't worry, this bill will only be 1995 pages long, well short of 2000. We'll know everything that is in it except for the stuff we don't, after the bill passes.
Fixed.
As long as those living off the government have the right to vote and outnumber voting workers, this will continue.
We've had that conversation about a million times before. It always gets very nasty. Can we stay on topic with this one? Or move that talk to another thread?
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Does anyone have any statistics at all showing the rate of defaults on Government-instigated loans, ie, loans for minority neighborhoods, loans for the poor?
Everything I've seen places most of the blame on Brokers and Banks screwing investors by bundling junk loans into securities and passing them off as good debt; that was a market incentive, not a government program.
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Does anyone have any statistics at all showing the rate of defaults on Government-instigated loans, ie, loans for minority neighborhoods, loans for the poor?
Everything I've seen places most of the blame on Brokers and Banks screwing investors by bundling junk loans into securities and passing them off as good debt; that was a market incentive, not a government program.
There are several very inconvenient maps out there detailing the counties and neighborhoods and distinguishing them by foreclosure rates. The vast, vast majority are concentrated in minority neighborhoods in a few states.
Here's a blog post from 2007 that runs through the history and links to articles from way back, some with really, really inconvenient headlines like, "Fannie Mae to invest $700 billion in minority housing." What could possibly go wrong?
http://isteve.blogspot.com/2007/08/trillion-here-trillion-there-pretty.html
From a 1999 article:
"Banks are under a great deal of pressure to lend in these communities," she says. "It is very political. But I still have reservations about whether you're really doing anyone a favor by letting them borrow 100 percent of the cost of a home. It makes it so easy for them to get in over their heads." If the economy turns sour and unemployment rises, minorities will be the first laid off -- paving the way for a wave of defaults.
Federal laws on fair lending and community reinvestment require bankers to reach out to minorities, notes David Lereah, chief economist with the Mortgage Bankers Association. The record rates of homeownership among minorities as well as the rest of the population shows that these reach-out programs are working.
Another article from 1999:
The mortgage industry intends to pursue minorities with greater intensity as federal regulators turn up the heat to increase home ownership in underserved groups.
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"'We need to push into these underserved markets as much as we can,' said David Glenn, president and chief operating officer of Freddie Mac.
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"Freddie Mac, like its sister agency Fannie Mae, is a government-chartered corporation that buys mortgages from banks and packages them into securities for investors.
"In September, Freddie Mac launched a new lending program, based on research done in collaboration with five black colleges, to bring more African-Americans into the market.
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"The federal government in the meantime has increased pressure on lenders to seek out minorities, as well as low-income groups and borrowers with poor credit histories.
"Fannie Mae recently reached an agreement with the U.S. Department of Housing and Urban Development to commit half its business to low-and moderate-income borrowers. That means half the mortgages bought by Fannie Mae would be from those income brackets."
Heres some commentary on a wapo article that falls into the "World Ends: Women & Minorities Hurt Disproportionately" category:
http://isteve.blogspot.com/2010/06/world-ends.html
The wapo article actually asks, "Are foreclosures racist?" I'm not making that up.
Here's a confession from a low-income homeownership advocate:
http://www.ft.com/cms/s/2/f64a9e36-9da3-11de-9f4a-00144feabdc0,dwp_uuid=a712eb94-dc2b-11da-890d-0000779e2340.html
A fascinating look into the ground-level goo-goo mindset and practice.
Mapping foreclosures in NYC metro:
http://www.nytimes.com/interactive/2009/05/15/nyregion/0515-foreclose.html
Here's one by metro area:
http://money.cnn.com/2010/04/29/real_estate/foreclosure_map/index.htm
Here's another by county:
http://www.foreclosurepulse.com/blogs/mainblog/archive/2010/09/01/july-2010-u-s-foreclosure-heat-map.aspx
DIY Foreclosure Mapping:
http://prof77.wordpress.com/2010/01/13/googles-foreclosure-maps-portrays-the-end-of-the-world-as-we-know-it/
Couple of NYT articles on how sub-prime lenders lent to poorer minority areas after having hte whip cracked. I
http://www.nytimes.com/2007/10/15/nyregion/15subprime.html?_r=1&oref=slogin&pagewanted=print
http://www.nytimes.com/2007/11/04/weekinreview/04bajaj.html?_r=1&pagewanted=print
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Does anyone have any statistics at all showing the rate of defaults on Government-instigated loans, ie, loans for minority neighborhoods, loans for the poor?
Everything I've seen places most of the blame on Brokers and Banks screwing investors by bundling junk loans into securities and passing them off as good debt; that was a market incentive, not a government program.
Yeah... For the same reason people get "rid" of counterfeit money -- it's worthless.
There's an old bromide in the study of economics; "The bad money drives the good money out of circulation."
If you create hollow debt instruments no one is going to keep it. They're going to bury it and get rid of it (ie., sell it). Who created that bad debt instrument?
Our beloved politicians did via the Community Reinvestment Act.
I won't say there wasn't greed involved, but then again, the brokers, the bankers, the wall street traders, they didn't invent greed. And politicians are not immune from it either.
But if you think (as a politician) you're going to jigger with a free interprise system without downside consequences you're a blind @ssh*l#.
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the folks in the industry made billions outa gaming that system and only a few raised a fuss they were ignored
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Wish kongress would quit "gaming" us all....... [barf] >:D :mad: :mad: :mad:
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Look for a plenary mortgage forgiveness, by hook or by crook, in our future.
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Look for a plenary mortgage forgiveness, by hook or by crook, in our future.
Tell me again why I bought less house than the bank would loan me money to buy? Why the heck ought I be prudent when the gov't rewards imprudence?
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Tell me again why I bought less house than the bank would loan me money to buy? Why the heck ought I be prudent when the gov't rewards imprudence?
Its called responsibility. This card house is coming down and folks like you and I, with our ducks in a row, are going to be in a better position than the irresponsible. Not cause we will be rewarded but because we have fewer of the FedGov's talons buried in our flesh and it will be easier to shake off the carcass when it starts to rot.
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the folksA subset of lenders in the industry made billions outa gaming that system and only a few raised a fuss they were ignored
FTFY :)
Why must we penalize everyone in the financial industry (as well as homebuyers trying to buy within their means) with another "government rescue" for the crimes of a small percentage (who were given the means by the government)?
If we do that, lets ban all guns because of the guy at Virginia Tech.
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I bought a house I could afford. The State/County appraised it 50k higher than I paid for it raising my taxes (this on a 113k home that I put some 15k in). I get disabled, go bankrupt, default on the loan and they sell my house for 135,303 on a 159,740 assessment (http://gis1.ci.staunton.va.us:8086/beta/parceldata.asp?gPin=242). I was told by my neighbor it had been sold for less than 100k and looked it up while typing this so I feel better now. At least Countrywide didn't take a bath at my expense. We had taken out a loan against it's accrued value of 124k JUST before the market fell to replace ALL the 1956 plumbing from the city water at the curb to the city sewer at the back fence!
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Googling on "Foreclosure map" got me to realtytrac (http://www.realtytrac.com/mapsearch/), which maps down to county, then gives a listing of sheriff's sales.
In my little city, they do not appear to be concentrated in the poor side. More into the lower middle class neighborhoods. But, with only 59 foreclosures for the whole county, concentrations might not show up.
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Okay, headlines are great - but where are the stats showing that it was government-sponsored or government-backed loans that defaulted at the high rate, causing the crisis?
That I do not see in any of the myriad of links. The data are out there, so if it's clearly the case that government programs caused this, why not show us the default rates to prove it?
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in my hood its the high end houses that are going up for short sale and foreclosure the poor hood? those folks so far are keeping theirs . lot easier to swing 1000 a month than 4000. the houses i see going are the ones folks are way upside down in and they are middle class or better for the most part
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in my hood its the high end houses that are going up for short sale and foreclosure the poor hood? those folks so far are keeping theirs . lot easier to swing 1000 a month than 4000. the houses i see going are the ones folks are way upside down in and they are middle class or better for the most part
Here are some stats on it http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf
(http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf)
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thats gonna leave a mark. sadly for two reasons one is that it mirrors what i am observing. the folks who got caught were playing the game with arms and trying to play property ladder in an unrealistic manner or just pulling out all the equity they could to finance lifestyle. and sadly also cause it puts me in the awkward spot of agreeing with you.... >:D =D i'm of a mind to say loudly get thee behind me satan and retreat.
i live adjacent to a great example of the mortgage meltdown
builder built 32 homes on 5-9 acre lots 650 to 900 k with his own home on a 13 acre lot at 1,295,000.00
when the bottom dropped out all but 11 of them went to the bank as he couldn't sell em and his notes were called in. the bank got 750 k plus average at that point in 07-08. 10 of those house have gone under again since folks moved in another 5 or 6 are in trouble. the folks who bought em were not middle class heck the one lowlife was a bigshot with dhs was on the phone with cheney when i was over a real well paid schmuck. he walked away "made better financial sense for him" bank just sold that house for 289 at a short sale 5000 sq foot house on 5 acres was originally 700 plus
the builders home? went from almost a mill .3 to 700 k.
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Don't worry CS&D, agreeing with me is fine as long as there're the numbers to back it.
Yeah, the ironic thing is seeing bankers crying "moral obligation" about those financial walk-aways....like the banks don't break contracts as soon as the dollars fail to add up.
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The reality is that the market needs to bottom out to recover. Holding prices at an unrealistic price when they should be forclosed on? Just another way to prolong the pain. Also, expect banks to become more stingy with loaning money.
The smart answer is to penalize banks severly for forclosing improperly on a home.
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The reality is that the market needs to bottom out to recover. Holding prices at an unrealistic price when they should be forclosed on? Just another way to prolong the pain. Also, expect banks to become more stingy with loaning money.
The smart answer is to penalize banks severly for forclosing improperly on a home.
The problem is that the banks dug a hole so deep that having all that correction at once could literally wreck the currency - Zimbabwe style inflation/worthlessness being the result. The banks successfully used that fact to get billions in taxpayer money without promising to do much for taxpayers in return.
I should add that any reasonable person with be with you on foreclosure penalties - if they'd stopped and not relied on phoney paper to begin with, we wouldn't be in this mess.
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Lawmakers sleeping with big business and creating the laws, rules, and agencies started the whole ball rolling to begin with. Congress holds a gun to their head and says "create low income loan vehicles". Banks figure out how to make money off those vehicles. And with a fistful of bad loans, wall street figures out how to make money off that, too. The CRA got the whole thing going. Everyone has a finger in the pie, and we expect Congess now to fix the mess they helped create?
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Lawmakers sleeping with big business and creating the laws, rules, and agencies started the whole ball rolling to begin with. Congress holds a gun to their head and says "create low income loan vehicles". Banks figure out how to make money off those vehicles. And with a fistful of bad loans, wall street figures out how to make money off that, too. The CRA got the whole thing going. Everyone has a finger in the pie, and we expect Congess now to fix the mess they helped create?
Except it wasn't the Government loans that caused the problem - I just linked a report showing that CRA default rates had nothing to do with this, and how they have lower default rates which makes sense...Government scrutiny of the paperwork in those loans is more likely.
Securitisation was a way to make money off of all loans, irrespective of how badly reviewed - the banker/investor aspect had absolutely zero to do with the lending on the bottom end. Those guys just didn't care; as long as a loan was made, any loan, they could sell it.
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The problem is that the banks dug a hole so deep that having all that correction at once could literally wreck the currency - Zimbabwe style inflation/worthlessness being the result. The banks successfully used that fact to get billions in taxpayer money without promising to do much for taxpayers in return.
Economics fail. Expanding credit is inflationary; contracting credit is deflationary.
If the banks had to recognize all of the bad credit on their books all at once, it would lead to a Great Depression style deflationary depression (or worse), not a Zimbabwe type hyperinflation.
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On second thought, never mind. Not worth it.
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SS:
Didn't read the articles, huh? Not surprising.
From 2008:
http://www.dallasnews.com/sharedcontent/dws/bus/stories/022908dnbusforeclose.1cbcd65.html
"Subprime loans make up less than 15 percent of the local mortgages, but they account for more than 50 percent of foreclosures."
Then, factor in that roughly 1/6 of white mortgages are sub-prime and 1/2 of NAM (Non-Asian Minority) mortgages are sub-prime, and the quantitative view gets clearer.
From 2008:
http://www.washingtonpost.com/wp-dyn/content/story/2008/06/29/ST2008062902089.html
"In New York City, for example, an analysis by the Furman Center for Real Estate and Urban Policy found that around 40 percent of subprime loans issued between 2004 and 2006 were made to blacks, and an additional third of such loans were given to Hispanics. Whites, by contrast, received around 10 percent of such loans, as did Asians.
40% + 33.3% = 73.3% of subprime loans to NAMs.
Thank you Community Reinvestment Act! Thank you Fannie & Freddie!
Oh, there are also McMansions and other top end houses getting foreclosed on, but the neighborhood foreclosure maps (DIY map I earlier linked to) show where the foreclosure center of mass is located (S Dallas, Oak Cliff, DeSoto, etc.). More of the non-subprime foreclosures in DFW are located in new-built neighborhoods away from the city center or immediate suburbs (McKinney,Frisco, etc.).
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Thank you Community Reinvestment Act!
You seem to be making a jump from subprime/minority to the CRA. Weren't there plenty of institutions that the CRA didn't even apply to that were churning out those subprime loans too? I've read that the institutions it didn't apply to did more subprimes that went bad than those that it did apply to. How does that fit in?
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an inconvenient detail
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You seem to be making a jump from subprime/minority to the CRA. Weren't there plenty of institutions that the CRA didn't even apply to that were churning out those subprime loans too? I've read that the institutions it didn't apply to did more subprimes that went bad than those that it did apply to. How does that fit in?
It's not just the CRA itself, though that is a big part of it. It's the whole "affordable housing" BS that the libs have been pushing for decades. It includes the CRA, the redlining shakedowns (given teeth in part by the CRA), the Freddie/Fannie cronyism, the regulator stonewalling, the FASB gimmicks, subsidized loans of many different stripes, risk transference, on and on.
It all adds up to a manipulated market that incentivised banks to to issue mortgages to risky borrowers in the name of "social justice" <spit>, rather than lend to borrowers based on their credit worthiness. It's the cause of the historic economic collapse we're still enduring. If you could put a face on our current economic troubles, it would be a toss up between either the CRA or the Banking Queen himself, Barney Frank. (That's why he's been my avatar these past few years.)
It's been said that the CRA was the catalyst that got it all going. To this day it's still the lightening rod that attracts all of the attention. It was at the center of the fatally flawed thinking that destroyed the economy, the poster child for all that went wrong.
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Foreclosure Fraud: It's Worse Than You Think
http://www.cnbc.com/id/39634568
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Economics fail. Expanding credit is inflationary; contracting credit is deflationary.
If the banks had to recognize all of the bad credit on their books all at once, it would lead to a Great Depression style deflationary depression (or worse), not a Zimbabwe type hyperinflation.
Yeah, you're missing the other side of it, when currency becomes worthless because the entire world loses confidence in your financial system.
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You seem to be making a jump from subprime/minority to the CRA. Weren't there plenty of institutions that the CRA didn't even apply to that were churning out those subprime loans too? I've read that the institutions it didn't apply to did more subprimes that went bad than those that it did apply to. How does that fit in?
Yep, this is exactly the problem - CRA does not equal subprime.
I love how the financial incentive (make a loan, take commission, sell to investor) is dismissed out of hand in favour of some mushy "affordable housing" ethic. Like the banks were really operating that way in the 90's, they didn't care about the money, they just got caught up in all that liberal propaganda. Haha.
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Yeah, you're missing the other side of it, when currency becomes worthless because the entire world loses confidence in your financial system.
I guess you've not been paying attention these past few years.
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I guess you've not been paying attention these past few years.
It's a lot easier to churn out one liners and insult other people than it is to make a point.
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We've been providing you with data and explanation all throughout this thread. You've consistently ignored it in favor of your skewed world view.
And I know from long experience that trying to explain economics and business concepts to you just doesn't work. You're a bright guy, but you just don't want to accept that the world doesn't work the way you think it does.
So what's left for me to do but point out that your blindly wrong?
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We've been providing you with data and explanation all throughout this thread. You've consistently ignored it in favor of your skewed world view.
And I know from long experience that trying to explain economics and business concepts to you just doesn't work. You're a bright guy, but you just don't want to accept that the world doesn't work the way you think it does.
So what's left for me to do but point out that your blindly wrong?
See what I mean here is this - the data don't match the claims (as ronnyreagan noted), and the claim is entirely to do with the data. I posted some data...but instead of responding to that or having other data, you boldly declare the truth, sometimes typing so quickly that you leave the " ' " and "e" out of "you're".
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Let's debate the facts. No personal attacks.
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See what I mean here is this - the data don't match the claims (as ronnyreagan noted), and the claim is entirely to do with the data. I posted some data...but instead of responding to that or having other data, you boldly declare the truth, sometimes typing so quickly that you leave the " ' " and "e" out of "you're".
I read your study, and posted a reply to it (#30 in this thread). I pointed out that the study was flawed and called your judgment into question for not noticing the flaws (or perhaps for thinking that we wouldn't notice them).
Then I edited it out. It was unnecessarily provocative, and as I've said, it's pretty pointless trying to discuss biz and econ with you. You'll believe what you will, based on whatever "evidence" you can turn up, whether it makes sense or not. I'm not going to get into one of these line-by-line debates with you on this. I've been there, done that, and I know it doesn't help anything.
So, if you think your position on the greater CRA affordable housing issue makes any sense, then hold to it. If you think your Traiger study is reliable, then shout it from the rooftops. If you think loss of confidence in the banking system is bad for the dollar, then ignore the past few years of real-world experience. Just don't be surprised if the rest of us snicker a little.
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Yep, this is exactly the problem - CRA does not equal subprime.
I love how the financial incentive (make a loan, take commission, sell to investor) is dismissed out of hand in favour of some mushy "affordable housing" ethic. Like the banks were really operating that way in the 90's, they didn't care about the money, they just got caught up in all that liberal propaganda. Haha.
For all practical purposes it does. CRA was a bludgeon over the heads of banks to lower lending standards. Others not covered by CRA, Countrywide being the biggest, were pressured and declared they would follow CRA guidelines. And who bought the lion's share of the subprime/junk loans right off the bat? Fannie & Freddie, who made it their objective to make 50% or more of their business (as pointed out in links & quotes above).
Fannie, Freddie, and political pressure on AIG to insure the junk/subprime loans were critical for the whole "affordable housing" initiative. Until F&F started to buy them up, there was no "market" for subprime loans ("We'll buy your sh!t loans!"). Until AIG was pressured into insuring the turds, there was no way to mix them in with other good loans.
Like HTG wrote, CRA was the necessary but insufficient beginning of gov't distortion of the housing market and as such gets most the heat.
Up until CRA, F&F's sucking up the bad paper, etc. lending standards had been static for decades and home ownership rates had been steady as well. It took gov't pressure to increase home ownership rates and the only way to increase it was to make riskier and riskier loans, as the good risks already had theirs.
We've been providing you with data and explanation all throughout this thread. You've consistently ignored it in favor of your skewed world view.
Pretty much. Not only that, what occurred was predicted back in 1999 when folks saw the pieces fall into place. It was just a matter of time.
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some of the paperwork shenanigans that have gone on are way over the top need to stop
Writes the AP:
In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.
So yeah, this was probably a good thing.
As a conservative, i'm not a huge fan of government regulation, but there needs to be something, sometimes.
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Countrywide being the biggest, were pressured and declared they would follow CRA guidelines.
how much pressure did it take to "force" them to make millions?
http://www.nytimes.com/2007/08/26/business/yourmoney/26country.html?pagewanted=all
has their arm recovered from all that twisting?
heres a hint countrywide is not your best pick for "victim" posterchild
Mr. Mozilo has ridden this remarkable wave to immense riches, thanks to generous annual stock option grants. Rarely a buyer of Countrywide shares — he has not bought a share since 1987, according to Securities and Exchange Commission filings — he has been a huge seller in recent years. Since the company listed its shares on the New York Stock Exchange in 1984, he has reaped $406 million selling Countrywide stock.
As the subprime mortgage debacle began to unfold this year, Mr. Mozilo’s selling accelerated. Filings show that he made $129 million from stock sales during the last 12 months, or almost one-third of the entire amount he has reaped over the last 23 years. He still holds 1.4 million shares in Countrywide, a 0.24 percent stake that is worth $29.4 million.
Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers, according to interviews with former employees and brokers who worked in different units of the company and internal documents they provided. One document, for instance, shows that until last September the computer system in the company’s subprime unit excluded borrowers’ cash reserves, which had the effect of steering them away from lower-cost loans to those that were more expensive to homeowners and more profitable to Countrywide.
my heart bleeds for them
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I did not mention Countrywide as a victim, I mentioned them as one if not the largest non-bank lender not covered by the CRA.
They were part of the problem and were busy tossing $$$ at Dobbs and Franks. Campaign contribs, sweetheart mortgage deals for congresscritters and their buddies, doing business as Franks & Dobbs wanted it done. In return for other benefits. It is one of the nastiest examples of corporatism(1) unearthed in the last few decades.
That doesn't change the fact that Dobbs, Franks, and regulators pressured them (& others in the industry), even if they are slimy in their own way. No matter how slimy CW is, CW does not have the power of gov't.
(1) Not "corporations are bad, boo, hiss" but, "gov't and large corporations colluding" bad. See ADM, the GM/Chrysler buy/bailouts, and many others.
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and countrywide wasn't cra.....
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and countrywide wasn't cra.....
You don't say...
CRA was a bludgeon over the heads of banks to lower lending standards. Others not covered by CRA, Countrywide being the biggest...
I did not mention Countrywide as a victim, I mentioned them as one if not the largest non-bank lender not covered by the CRA.
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the amount of crap that banks/lenders pull off daily is amazing. and they get away with it because their victims are often unaware or don't have the resources to fight em
this time they got caught trying to shift the blame is another of their tactics and i'm surprised so many buy it
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the cra didn't make em do this
As recently as July 27, Countrywide’s product list showed that it would lend $500,000 to a borrower rated C-minus, the second-riskiest grade. As long as the loan represented no more than 70 percent of the underlying property’s value, Countrywide would lend to a borrower even if the person had a credit score as low as 500. (The top score is 850.)
The company would lend even if the borrower had been 90 days late on a current mortgage payment twice in the last 12 months, if the borrower had filed for personal bankruptcy protection, or if the borrower had faced foreclosure or default notices on his or her property.
heres why they did it
Such loans were made, former employees say, because they were so lucrative — to Countrywide. The company harvested a steady stream of fees or payments on such loans and busily repackaged them as securities to sell to investors. As long as housing prices kept rising, everyone — borrowers, lenders and investors — appeared to be winners.
One former employee provided documents indicating Countrywide’s minimum profit margins on subprime loans of different sizes. These ranged from 5 percent on small loans of $100,000 to $200,000 to 3 percent on loans of $350,000 to $500,000. But on subprime loans that imposed heavy burdens on borrowers, like high prepayment penalties that persisted for three years, Countrywide’s margins could reach 15 percent of the loan, the former employee said.
Regulatory filings show how much more profitable subprime loans are for Countrywide than higher-quality prime loans. Last year, for example, the profit margins Countrywide generated on subprime loans that it sold to investors were 1.84 percent, versus 1.07 percent on prime loans. A year earlier, when the subprime machine was really cranking, sales of these mortgages produced profits of 2 percent, versus 0.82 percent from prime mortgages. And in 2004, subprime loans produced gains of 3.64 percent, versus 0.93 percent for prime loans.
One reason these loans were so lucrative for Countrywide is that investors who bought securities backed by the mortgages were willing to pay more for loans with prepayment penalties and those whose interest rates were going to reset at higher levels. Investors ponied up because pools of subprime loans were likely to generate a larger cash flow than prime loans that carried lower fixed rates.
As a result, former employees said, the company’s commission structure rewarded sales representatives for making risky, high-cost loans. For example, according to another mortgage sales representative affiliated with Countrywide, adding a three-year prepayment penalty to a loan would generate an extra 1 percent of the loan’s value in a commission. While mortgage brokers’ commissions would vary on loans that reset after a short period with a low teaser rate, the higher the rate at reset, the greater the commission earned, these people said.
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Yeah, I'm still having a hard time seeing how millions in profits to be made by ripping off investors was less the cause of this than some sort of "culture" of lending to poor folks under Government supervision.
If there is one culprit to be named, it is the finance industry - wall street came up with these garbage financial products that no one understands, had them rated AAA, and sold them to an investor community that apparently didn't know or didn't care. Epic wall street fail, in other words.
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Wall Street didn't write the rules of the game, they just played by them.
The old way to make money in lending was to issue loans to people who'd pay them back with interest. Obviously this only works when the borrower repays, so banks tended to put some effort into determining who'd repay and who wouldn't.
Enter government. The cabal of social justice do-gooders decided that it was racist not to lend to poor people who wouldn't repay the loans, and they set about attacking banks politically for the practice of only lending to people wealthy enough to justify the loan. The CRA was the big stick threat in this, both for what it actually said and for what it portended in further punitive legislation, but there was plenty more to it. Janet Reno, Chuck Schumer, Jesse Jackson, Dodd and Frank were all happy to threaten and attack lenders who didn't play ball according to the new standards.
So, the banks played ball. They started issuing loans to people who couldn't afford them, especially to minorities. They started pushing unconventional loan types like ARMs, interest-only, 100% LTV, etc. to people who couldn't qualify for the usual 10% or 20% down fixed rate loans. They sometimes did this specifically under the auspices of the CRA, but they did it for plenty of other political reasons, too, such as keeping the Justice Department from attacking them or the race-baiters from picketing and boycotting them.
The lenders knew there was no way to make money off the interest payments from these loans, they were too likely to default, so they did their best to make their profits on the transaction instead. (That's what CS&D's Countrywide post describes in detail.) But banks still had a problem with all of these garbage loans on their books, and were still somewhat reluctant to engage in the practice.
Enter government again. Freddie and Fannie and Franklin Raines and Dodd and Frank and AIG stood ready to make sure that banks could guarantee their bad loans against default, allowing them to package the loans into "safe" MBS's and sell them on the secondary market. This provided yet another opportunity to profit off of the transaction rather than the intrinsic value of the loans, further encouraging the practice of issuing mortgages for volume rather than for creditworthiness.
And perhaps cleverest of all, banks figured out that under the new rules of the game they could repurchase their own crummy loans back off of the secondary market and collect that interest risk-free because of the loan guarantees. The guarantors were the ones who would suffer in case of default, not the banks.
So of course they did it. Nobody with a brain would have expected anything else. It was as close to a money machine as anything I've ever seen, with the only real risk applying to the fools guaranteeing the loans. And because of the implicit FedGov backing for Freddie and Fannie, it was ultimately the US taxpayer who guaranteed those bad loans. Dodd and Frank and Pelosi were pocketing campaign contributions from Freddie and Fannie all along the way, defending the process in Congress at every step.
So, who's fault was all this? You can blame the banks if you want, but the ultimate culprits were the politicians who re-wrote the rules to the game. They not only made this mode of mortgage lending possible, they also made sure there was no real alternative for the big banks. The CRA and wider affordable housing efforts provided both the carrot and the stick to get the mortgage industry transform itself from a lend-for-quality and profit-on-interest mode of operation into the current lend-for-volume and profit-on-transaction-fees mode of operation.
I doubt the affordable housing proponents meant for this to happen, but unintended consequences are like that. I also doubt any of them would support efforts to return the rules to their old format where banks held their loans because they represented a quality investment.
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Those are all assertions - do you actually have anything that statistically relates CRA loans to defaults? Like a data source?
Maybe you don't buy the one I posted - but all I'm seeing is your assertion that banks did this for image reasons, and then tried to make money as an afterthought, which I don't find particularly compelling (you'd imagine in most dealings making money was the first idea they came up with.)
So, is there a report, study, or evidence of any kind that actually provides numbers to relate the CRA loans to defaults, and CRA loans in particular to securitisation?
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I'm not sure why you're so hung up on academic studies. This is a matter of history, of a long string of current events playing out in real time. I know this is what happened because I was paying attention and I saw it as it happened.
Were you paying attention all this time? If you were, you surely would have seen the very same things.
If you really want to learn about all this, dispense with the liars-can-figure statistical studies and go back through the historical record.
Try a quick google search for "Janet Reno redlining" or "Jesse Jackson redlining". See if the CRA ties in with any of it.
Dig through the news articles related to the CRA from the 90's and 2000's.
Did LibDems ever threaten to shut down banks that didn't play ball with them? Did they ever succeed at killing any banks (ChuckSchumercoughcough)?
Did the Bush admin ever sound an alarm on the Freddie/Fannie mess and propose a major overhaul to fix it (perhaps back in 2003, hmm)?
Put some effort into learning about CDO's and RMBS's and about the secondary credit markets (sometimes called the "shadow banking system") and about the business of banking in general. This stuff isn't particularly secretive, it's just that most people never bother to learn unless it's part of their occupation.
Roo mentioned a specific prediction of these problems from a decade ago. It didn't take me long to find what he was referring to. Why don't you look into it?
Take a gander into Freddie and Fannie's lobbying activities and campaign contributions. Maybe look for actions from powerful Congress members that could be thought of as repaying or rewarding those contributions.
I can't cite a single study or report that will magically educate you on this stuff, but you could learn it on your own if you've got the motivation. Fair warning though, keeping an open mind on this stuff may force you to rework your particular world view.
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Those are all assertions - do you actually have anything that statistically relates CRA loans to defaults? Like a data source?
Maybe you don't buy the one I posted - but all I'm seeing is your assertion that banks did this for image reasons, and then tried to make money as an afterthought, which I don't find particularly compelling (you'd imagine in most dealings making money was the first idea they came up with.)
So, is there a report, study, or evidence of any kind that actually provides numbers to relate the CRA loans to defaults, and CRA loans in particular to securitisation?
Actually the banks did this all because they wanted to lose millions of dollars ...... [tinfoil] [tinfoil] :facepalm: :facepalm: :facepalm: [barf] [barf] [popcorn] [popcorn]
Great Caesar's Ghost. The banking profession goes back hundreds of years. I think they have had plenty of time to work out what principles work and to know what does not work in their profession. Do you truly believe they deliberatly designed these loans to fail?
Is there nothing politicians have done for which you would hold THEM responsible? Do YOU really think politicians can tweak the economic system and twist arms and there be no consequences at all? Do you blindly assume that since their motives might be "benign" that they're also smart enough to enact legislation that will actually benefit anyone? ? ?
Headless Thompson Gunner (a nomdeplum after my own heart :angel:) has well explained what happened.
You want some academic study? Why don't you write one.
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Actually the banks did this all because they wanted to lose millions of dollars ..
the banks never lose they made billions look at just countrywide and what the one man made , in a non cra bank
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I'm not sure why you're so hung up on academic studies. This is a matter of history, of a long string of current events playing out in real time. I know this is what happened because I was paying attention and I saw it as it happened.
Pretty much.
One thing I have learned during this thread is that most folks forget most political machinations over time or they never paid much attention to them the first time 'round. Nothing personal, but I remember all the "redlining" accusations by the Usual Suspects and the defense of then-contemporary business practices by bankers and other more free-market-oriented folk. The key bit of data being that the old way of doing things resulted in near-identical default rates across races. If NAMs had been held to higher standards, there would have been relatively fewer NAM defaults.
Didn't matter, the social engineers used the club of gov't power to get their desired results.
The resulting bubble is the result of the gov't monkeying. It was not a surprise and it was not unforeseeable.
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the banks never lose they made billions look at just countrywide and what the one man made , in a non cra bank
I was being sarcastic, cassandra and sara's daddy. :angel:
Anyway .... there have been plenty of bank failures in the past couple of years ... so I guess someone's not letting them in on the secret.... [tinfoil]
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JPMorgan & Chase had a cute name, the "Burger King Kids," for the workers with little no experience or qualifications it hired to process the reams of mortgages it plowed through at the height of the housing bubble.
More at the consumerist link, below:
http://consumerist.com/2010/10/banks-hired-burger-king-kids-to-process-mortgages.html
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http://www.washingtonpost.com/wp-dyn/content/article/2010/10/15/AR2010101506541.html?hpid%3Dmoreheadlines&sub=AR
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I'm not sure why you're so hung up on academic studies. This is a matter of history, of a long string of current events playing out in real time. I know this is what happened because I was paying attention and I saw it as it happened...
I can't cite a single study or report that will magically educate you on this stuff, but you could learn it on your own if you've got the motivation. Fair warning though, keeping an open mind on this stuff may force you to rework your particular world view.
All that assertion, and still not a single study that relates CRA loans to defaults and the housing crisis. I don't need a magic article, I just need one (and haven't found one in googling your key words) that gives an actual number on CRA to subprime defaults.
It seems reasonable, when a claim is being made about how lots of CRA loans caused the housing bubble, to ask for numbers. They certainly exist to show that the CRA was not the cause of the crisis; if it's so obvious, why aren't there any studies that crunch the numbers for the opposite outcome?
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Are there any "studies" that show the only source of "facts" is in "studies??" [tinfoil] [tinfoil] [popcorn] [popcorn]
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Looks like even this Administration's Housing Secretary gets it:
http://www.foxnews.com/politics/2010/10/17/foreclosure-freeze-drag-property-values-housing-chief-warns/
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And now the problems come home to roost - homeowners who keep track of things are going to be able to own their home without having to pay for it.
http://bayourenaissanceman.blogspot.com/2010/10/just-what-does-mortgage-mess-mean.html
The basic message is that if you don't know who, legally, you are supposed to pay you don't have to pay anybody.
And banks are seeing their ability to keep track of who owns the note is getting closer to impossible.
A whole lot of stuff to consider, and more than I can figure out overnight. But since I am renting it is all just :facepalm: [popcorn] [popcorn] to me.
stay safe.
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And now the problems come home to roost - homeowners who keep track of things are going to be able to own their home without having to pay for it.
http://bayourenaissanceman.blogspot.com/2010/10/just-what-does-mortgage-mess-mean.html
The basic message is that if you don't know who, legally, you are supposed to pay you don't have to pay anybody.
And banks are seeing their ability to keep track of who owns the note is getting closer to impossible.
A whole lot of stuff to consider, and more than I can figure out overnight. But since I am renting it is all just :facepalm: [popcorn] [popcorn] to me.
stay safe.
Holy crap, that just might cause TEOFWAKI and the STHTF !!
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Excuse me, I must interject:
Incentives matter.
Incentives matter.
Incentives matter.
Incentives matter.
Whew, there we go. Now you all may continue your fruitless reasoning with ShootinStudent.
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Excuse me, I must interject:
Incentives matter.
Incentives matter.
Incentives matter.
Incentives matter.
Whew, there we go. Now you all may continue your fruitless reasoning with ShootinStudent.
Yeah, the point here is that CRA is billed as a moral/.gov incentive to lend to risky subjects, whereas the hard financial incentive to lend to anyone and then pass off the bad papers to investors is discounted.
If incentives matter, why wouldn't the billions in profits from bilking investors be counted as slightly more relevant to this mess than the CRA?
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Yeah, the point here is that CRA is billed as a moral/.gov incentive to lend to risky subjects, whereas the hard financial incentive to lend to anyone and then pass off the bad papers to investors is discounted.
If incentives matter, why wouldn't the billions in profits from bilking investors be counted as slightly more relevant to this mess than the CRA?
SS:
No, it is not. It has already been mentioned up-thread that gov't-supported enterprises (F&F), made it their business to create a market and buy these turn loans, get insurance for them, and bundle them up with other loans. Lenders could then make the turd loans, pocket origination fees, and get the turds off their books.
Without F&F to "launder" these loans, the whole sub-prime loan deal was at a stand-still. As history showed, from the initial passing of the CRA until F&F made turd loans their mission, there was little sub-prime action. When F&F made them 1/2 their business, then the turd loan volume went apey.
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Yeah, the point here is that CRA is billed as a moral/.gov incentive to lend to risky subjects, whereas the hard financial incentive to lend to anyone and then pass off the bad papers to investors is discounted.
If incentives matter, why wouldn't the billions in profits from bilking investors be counted as slightly more relevant to this mess than the CRA?
:facepalm: Geeesh. NO ONE has "discounted" the bad paper!!! It is part of what caused this mess!!! The government twisted the arm of bankers to make what would otherwise be bad loans, there were defaults, and the empty debt instruments were bundled and sold. Whether you like it or not many of these banks/companies have a fiduciary responsibility to their holders to keep the firm well off. That means they don't LIKE those bad instruments and SELL them --bundling them makes them palatable. A few times ... doesn't hurt, but it builds up over time and in conjunction with other factors, causes a bubble that blows up.
This happened because of government intervention. Lack of intervention doesn't prove everyone outside the government is a saint and will always make wise decisions .... but face it; government does NOT help in this regard, it hurts.
Most of our "esteemed" leaders in kongress have never held a real job in the real world. Many who have have held jobs that didn't teach them very much about how the world works. Consequently they go into politics with a desire to "change the world" (usually on a powertrip) and wind up mucking things up.
"Politicians are like rats. What they steal for themselves is miniscule compared to what they destroy in the process."~~ pithy quote from internet prophet found on a different website.
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SS:
No, it is not. It has already been mentioned up-thread that gov't-supported enterprises (F&F), made it their business to create a market and buy these turn loans, get insurance for them, and bundle them up with other loans. Lenders could then make the turd loans, pocket origination fees, and get the turds off their books.
Without F&F to "launder" these loans, the whole sub-prime loan deal was at a stand-still. As history showed, from the initial passing of the CRA until F&F made turd loans their mission, there was little sub-prime action. When F&F made them 1/2 their business, then the turd loan volume went apey.
And here it is.
It's not CRA alone that is responsible.
It's two massive government backed agencies providing the FULL FAITH AND CREDIT (implicitly) of the government for terrible loans.
It's the democrats circling the wagons on their pet agencies and preventing THEM from being more regulated. It wasn't an under-regulation problem, it was a WRONG regulation problem.
We regulated the banks but let FNMA and FHLMC create a massive bubble of terrible loans. This is directly attributable to the democrats and SPECIFICALLY Barney Frank who had a massive conflict of interest that we aren't allowed to talk about because he's gay.
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Again, no numbers for CRA loans (and there are such numbers) - just more allegation and speculation as to what the banks would have done in the alternative, as if figuring out that they could make billions by ripping off investors wouldn't have happened but for the CRA?!
Let's try this as a thought exercise, since no data apparently are going to be offered to support this claim:
Imagine the CRA was never passed, and Fannie never guaranteed low-income loans. How does that take away the banks' and brokers' incentives to sign as many loans as possible, and then sell them on wall street?
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...(and there are such numbers)...
Well, if there are such numbers, why don't you lay them out to back your case?
If any of you guys arguing with De Selby want to borrow my hammer for hitting yourself, let me know. It does feel better than going in circles.
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Well, if there are such numbers, why don't you lay them out to back your case?
If any of you guys arguing with De Selby want to borrow my hammer for hitting yourself, let me know. It does feel better than going in circles.
Wait a sec here mate, I did post a study that analyzed rates of default in CRA-affected loans and banks. I've seen no similar analysis to the contrary yet.
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http://bayourenaissanceman.blogspot.com/2010/10/am-i-prophet-or-what.html
Guess what happened today?
HOUSTON, Oct. 18 /PRNewswire/ --Today, the holders of over 25% of the Voting Rights in more than $47 billion of Countrywide-issued RMBS sent a Notice of Non-Performance (Notice) to Countrywide Home Loan Servicing, as Master Servicer ("Countrywide Servicing"), and to Bank of New York, as Trustee, identifying specific covenants in 115 Pooling and Servicing Agreements (PSAs) that the Holders allege Countrywide Servicing has failed to perform.
The Holders' Notice alleges that each of these failures has materially affected the rights of the Certificateholders under the relevant PSAs. Under Section 7.01 of the PSAs, if any of the cited failures "continues unremedied for a period of 60 days after the date on which written notice of such failure has been given ... to the Master Servicer and the Trustee by the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates," that failure constitutes an Event of Default under the PSAs.
In a previous release, the Holders emphasized their intent to invoke all contractual remedies available to them to recover their losses and to protect their rights. Kathy Patrick of Gibbs & Bruns LLP, lead counsel for the Holders, emphasized that the Holders' notice does not seek to halt loan modifications for troubled borrowers. Instead, it urges the Trustee to enforce Countrywide Servicing's obligations to service loans prudently by maintaining accurate loan records, demanding the repurchase of loans that were originated in violation of underwriting guidelines, and compelling the sellers of ineligible or predatory mortgages to bear the costs of modifying them for homeowners or repurchasing them from the Trusts' collateral pools.
There's more at the link. Bold print is my emphasis.
Folks, this is only one legal step, a preliminary to a lawsuit from a single group of investors, issued against a single bank (well, two, in the sense that Countrywide - which originally issued the securitized mortgages - is now owned by Bank of America, which inherited the former's legal liabilities as part of the purchase). This single lawsuit might involve as much as 47 billion - that's B for BILLION - dollars. There are hundreds, if not thousands, of similar groups here and around the world, all of whom are going to want to recover their investments in fraudulent and/or misrepresented securitized mortgages. Most of them can be counted on to pursue similar legal steps. Anyone care to guess just how high the total amount involved may go? If you guesstimate in the trillions, I won't disagree with you.
And the fall-out's just beginning . . .
Handbasket? Check. Directions to Hell? Check. [popcorn]? Check. Big Comfy Chair? Need to get.
stay safe.
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.... Imagine the CRA was never passed, and Fannie never guaranteed low-income loans. How does that take away the banks' and brokers' incentives to sign as many loans as possible, and then sell them on wall street?
Rather than that, ask what would be the banks' motives for doling out a lot of loans to people who are bad risks if there was no CRA?
The issue isn't necessarily the number of loans, it's the number of bad loans prompted by the CRA and other forces out to try to increase "home ownership" beyond the ability of the people to repay loans.
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Imagine the CRA was never passed, and Fannie never guaranteed low-income loans. How does that take away the banks' and brokers' incentives to sign as many loans as possible, and then sell them on wall street?
Yes, and that's exactly what the banks were doing prior to the CRA/Fannie/Freddie... oh wait..
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And here's yet another reason these "quick fixes" bother me. I have had several mortgages over my life. I have accepted the interest rate and conditions at the time of the loan. In some cases, when interest rates improved, I took it upon myself to refinance and pay the points for doing so. I paid all my mortgages off and paid them all on time. I knew I was getting into debt, that there was no guarantee of profit, and I accepted that responsibility. I would have loved to have had my mortgage payments magically cut in half without adding extra years to the loan by simply saying, "I can't afford it anymore".
This kind of thing take away all practical reasons for being responsible. There is still the moral obligation of responsibility, but it's a lot harder when you know you're being punished for being responsible.
http://www.foxnews.com/us/2010/10/20/shattered-dreams-new-class-warfare/
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my sis graduated from yale law in 84 or 85 with a 4.0 practiced real estate law as well as teaches it. she says that there is no way even she could read all the crap they jam past you at closing (and she really speed reads) it requires trust and a certain level of integrity on the part of the real estate and loan professionals to make it work right the integrity is missing all too often nowadays hence the current debacle
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Imagine the CRA was never passed, and Fannie never guaranteed low-income loans. How does that take away the banks' and brokers' incentives to sign as many loans as possible, and then sell them on wall street?
Simple. There would be no buyers for the loans on Wall Street. The Fannie-Mae/Freddie-Mac guarantees on the loans were the only thing that made them attractive to buyers. No one is going to spend money on a bundle of risky loans without some sort of guarantee.
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Simple. There would be no buyers for the loans on Wall Street. The Fannie-Mae/Freddie-Mac guarantees on the loans were the only thing that made them attractive to buyers. No one is going to spend money on a bundle of risky loans without some sort of guarantee.
^^^
"Full faith and credit of the US Government."
Banks took these risks because they believed the government would back them if they failed. AND they were right.
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http://www.finalcall.com/artman/publish/article_4275.shtml
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http://www.slate.com/id/2271647?nav=wp
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And here's yet another reason these "quick fixes" bother me. I have had several mortgages over my life. I have accepted the interest rate and conditions at the time of the loan. In some cases, when interest rates improved, I took it upon myself to refinance and pay the points for doing so. I paid all my mortgages off and paid them all on time. I knew I was getting into debt, that there was no guarantee of profit, and I accepted that responsibility. I would have loved to have had my mortgage payments magically cut in half without adding extra years to the loan by simply saying, "I can't afford it anymore".
This kind of thing take away all practical reasons for being responsible. There is still the moral obligation of responsibility, but it's a lot harder when you know you're being punished for being responsible.
http://www.foxnews.com/us/2010/10/20/shattered-dreams-new-class-warfare/
It just goes to show that the Usual Suspects still haven't learned.
Government broke the banking industry. Without a sound banking system, the economy tanked. So what are they trying to do about it? They're trying to screw up the banks even more. Will this help the banking industry recover and restore the economy to sound footing?
And I bet the lawyers are all really salivating over this mess.
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my sis graduated from yale law in 84 or 85 with a 4.0 practiced real estate law as well as teaches it. she says that there is no way even she could read all the crap they jam past you at closing (and she really speed reads) it requires trust and a certain level of integrity on the part of the real estate and loan professionals to make it work right the integrity is missing all too often nowadays hence the current debacle
When I bought my last house, the sellers were late getting their ducks in a row, so the closing company couldn't prepare the documents on time. The closing was scheduled for 8:00 am, they gave me the documents at midnight the night before.
I made 'em push the closing data back 3 days, at seller's expense, so that I'd have time to read all of the documents before I signed 'em. I wasn't going to enter into any long term commitment without knowing exactly what that commitment was.
They all thought I was weird for wanting to read everything. I thought they were weird for thinking I was weird.
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http://www.dailyfinance.com/story/real-estate/bailouts-freddie-mac-fannie-mae/19683516/?icid=fbuzz|bailouts-freddie-mac-fannie-mae/19683516/
363 billion to bail out freddie and fannie
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http://www.dailyfinance.com/story/real-estate/bailouts-freddie-mac-fannie-mae/19683516/?icid=fbuzz|bailouts-freddie-mac-fannie-mae/19683516/
363 billion to bail out freddie and fannie
If they then sold them off, I'd be happy at that price.